Introduction

An organization, by its most basic definition, is an assembly of people

working together to achieve common objectives through a division of labor. An
organization provides a means of using individual strengths within a group to
achieve more than can be accomplished by the aggregate efforts of group members
working individually. Business organizations are formed to deliver goods or services
to consumers in such a manner that they can realize a profit at the conclusion of
the transaction. Over the years, business analysts, economists, and academic
researchers have pondered several theories that attempt to explain the dynamics of
business organizations, including the ways in which they make decisions, distribute
power and control, resolve conflict, and promote or resist organizational change. As
Jeffrey Pfeffer summarized in New Directions for Organization Theory, organizational
theory studies provide "an interdisciplinary focus on

• the effect of social organizations on the behavior and attitudes of individuals

within them

• the effects of individual characteristics and action on organization

• the performance, success, and survival of organizations

• the mutual effects of environments, including resource and task, political,

and cultural environments on organizations and vice versa

• concerns with both the epistemology and methodology that undergird

research on each of these topics

Definition

Organizational theory is the systematic study and careful application of

knowledge about how people - as individuals and as groups - act within
organizations. It is also Study of organizational designs and organizational
structures, relationship of organizations with their external environment, and
the behavior of managers and technocrats within organizations. It suggests ways in
which an organization can cope with rapid change. Organization theory tends to be
more macro oriented than organization behavior and is primarily concerned with
organization structure and design.

Future organizations must be capable of changing relative to a quickly

changeable world. It may be relevant to include relations to society and the
influence on and from other organizations. And naturally, there are also relations
between the organization’s own teams and individuals. Thus, an organization may
be viewed from different angles.

APPLICATIONS OF ORGANIZATION THEORY

Those who want to improve the value of a company need to know

Strategy/Fina how to
nce organize to achieve organizational goals; those who want to
monitor and
control performance will need to understand how to achieve results
by
structuring activities and designing organizational processes.

Marketers know that to create a successful corporate brand they

Marketing need to
get the organization behind the delivery of its promise; a thorough
understanding of what an organization is and how it operates will
make
their endeavors to align the organization and its brand strategy
more
feasible and productive.

The way information flows through the organization affects work

Information processes
technology and outcomes, so knowing organization theory can help IT
specialists
identify, understand and serve the organization’s informational
needs as
they design and promote the use of their information systems.

Value chain management has created a need for operations

managers to
Operations interconnect their organizing processes with those of suppliers,
distributors
and customers; organization theory not only supports the technical
aspects
of operations and systems integration, but explains their socio-
cultural
aspects as well.

Nearly everything HR specialists do from recruiting to

 compensation has
organizational ramifications and hence benefits from knowledge
Human provided
resources by organization theory; organizational development and change are
particularly
important elements of HR that demand deep knowledge of
organizations
and organizing, and organization theory can provide content for
executive
training programs.

Corporate communication specialists must understand the

Communicatio interpretive
n processes of organizational stakeholders and need to address the
many
ways in which different parts of the organization interact with each
other
and the environment, in order to design communication systems
that are
effective or to diagnose ways existing systems are misaligned with
the
organization’s needs.

HISTORY

The Greek philosopher Plato wrote about the essence of

leadership. Aristotle addressed the topic of persuasive communication. The writings
of 16th century Italian philosopher Niccolò Machiavelli laid the foundation for
contemporary work on organizational power and politics. In 1776, Adam
Smith advocated a new form of organizational structure based on the division of
labour. One hundred years later, German sociologist Max Weber wrote about
rational organizations and initiated discussion of charismatic leadership. Soon
after, Frederick Winslow Taylor introduced the systematic use of goal setting and
rewards to motivate employees. In the 1920s, Australian-born Harvard
professor Elton Mayo and his colleagues conducted productivity studies at Western
Electric's Hawthorne plant in the United States.

Though it traces its roots back to Max Weber and earlier, organizational
studies is generally considered to have begun as an academic discipline with the
advent of scientific management in the 1890s, with Taylorism representing the peak
of this movement. Proponents of scientific management held that rationalizing the
organization with precise sets of instructions and time-motion studies would lead to
increased productivity. Studies of different compensation systems were carried out.

Modern organization theory is rooted in concepts developed during the

beginnings of the Industrial Revolution in the late 1800s and early 1900s. Of import
during that period was the research of German sociologist Max Weber (1864-1920).
Weber believed that bureaucracies, staffed by bureaucrats, represented the ideal
organizational form. Weber based his model bureaucracy on legal and absolute
authority, logic, and order. In Weber's idealized organizational structure,
responsibilities for workers are clearly defined and behavior is tightly controlled by
rules, policies, and procedures.

Weber's and Fayol's theories found broad application in the early and mid-
1900s, in part because of the influence of Frederick W. Taylor (1856-1915). In a
1911 book entitled Principles of Scientific Management, Taylor outlined his theories
and eventually implemented them on American factory floors. He is credited with
helping to define the role of training, wage incentives, employee selection, and work
standards in organizational performance.

After the First World War, the focus of organizational studies shifted to
analysis of how human factors and psychology affected organizations, a
transformation propelled by the identification of the Hawthorne Effect. This Human
Relations Movement focused on teams, motivation, and the actualization of the
goals of individuals within organizations.

Prominent early scholars included Chester Barnard, Henri Fayol, Frederick

Herzberg, Abraham Maslow, David McClelland, and Victor Vroom.

The Second World War further shifted the field, as the invention of large-scale
logistics and operations research led to a renewed interest in rationalist approaches
to the study of organizations. Interest grew in theory and methods native to the
sciences, including systems theory, the study of organizations with a complexity
theory perspective and complexity strategy. Influential work was done by Herbert
Alexander Simon and James G. March and the so-called "Carnegie School" of
organizational behavior.

The focus on human influences in organizations was reflected most

noticeably by the integration of Abraham Maslow's "hierarchy of human needs" into
organization theory. Maslow's theories introduced two important implications into
organization theory. The first was that people have different needs and therefore
need to be motivated by different incentives to achieve organizational objectives.
The second of Maslow's theories held that people's needs change over time,
meaning that as the needs of people lower in the hierarchy are met, new needs
arise. These assumptions led to the recognition, for example, that assembly-line
workers could be more productive if more of their personal needs were met,
whereas past theories suggested that monetary rewards were the sole, or primary,
motivators.

In the 1960s and 1970s, the field was strongly influenced by social
psychology and the emphasis in academic study was on quantitative research. An
explosion of theorizing, much of it at Stanford University and Carnegie Mellon,
produced Bounded Rationality, Informal Organization, Contingency
Theory, Resource Dependence, Institutional Theory, and Organizational
Ecology theories, among many others.

Starting in the 1980s, cultural explanations of organizations and change

became an important part of study. Qualitative methods of study became more
acceptable, informed by, anthropology, psychology and sociology. A leading scholar
was Karl Weick.
 There are so many organizational theories since 1900. Some most significant
theories which made important contribution were

Scientific Management Theory

Scientific Management originated in the beginning of the 20th century, and

Frederick W. Taylor was the primary contributor. Scientific Management was based
on an idea of systematization where attempts were made to enhance the efficiency
of procedures to best effect via scientific analyses and experiments. Taylor believed
that it was possible to prescribe the processes that resulted in maximum output
with a minimum input of energy and resources. Thus, Taylor’s starting point was the
individual work process, which had considerable consequences throughout the
system. The structure had to be adapted to the focus that was put on work
processes, and in doing so; the manager lost his governing role as he was subjected
to scientifically calculated solutions. Therefore, it was necessary to establish a staff
of specialists who were capable of determining the optimum work processes. Since
the employee and his handling of work processes was the starting point, Taylor’s
approach is categorized as a bottom up approach.

Scientific Management was quickly adopted by large mass-producing

industrial companies. Henry Ford is the most outstanding example of what is
characterized as the ‘industrial revolution’. From studies of time and carefully
determined educational skills, cars were now constructed by mass production in
fixed, machine-like procedures, which created a new ism – Fordism.

Hence, Scientific Management has had a decisive and long impact on the
industrial practice and on the theoretical ideas of organizations in general. Later on,
the theory was criticized by both employees and managers as scientific time studies
disregarded their own common sense and judgment. As a result of this resistance
and the spread of other views of humanity, Scientific Management is no longer
prevalent as a managerial ideology. However, it still functions as a guideline for
technical procedures, not only in the industrial sector, but also in the service sector.
Bureaucracy Model Theory

Max Weber is described as the father of sociology, and he has made great
efforts to elucidate conditions in Western civilization. He developed an
understanding of bureaucracy. Bureaucracy is fundamental as it represents a basic
pattern which exists in many variants.

Weber is different from Taylor and Fayol in that he has a broader approach to
organizations as he includes the social and historical perspective. He believes that
the understanding of organizations and their structure can be found in the historical
context, and he develops a normative ideal for bureaucracy, which is reflected in his
view of e.g. the public employee.

According to Weber, the public employee must act as if the superior’s

interests were his own and thus stay in his bureaucratically assigned role9.
Bureaucracy must consist of neutral professional public employees so that the
organizational hierarchy can function as smoothly and effectively as possible.
Weber established a number of criteria for bureaucracy:

According to Weber, bureaucracy is: “A specific administrative structure,

which is based on a legal and rule oriented authority”

Bureaucracy has the following characteristics :

• Established distribution of work between the members of the organization

• An administrative hierarchy
• A rule-oriented system, which describes the performance of the work
• Separation of personal possessions and rights for the office
• Selection of staff according to technical qualifications
• Employment involves a career

Additional to the emphasis on the hierarchical aspect of obedience, Weber

perceives goal-rational action as the optimum form of behavior. Acting goal-
rationally is an ideal approach, which considers goals, means and side effects.
These three factors must be weighed in relation to each other; means in relation to
goals, goals in relation to side effects, and finally, different possible goals in relation
to each other. In doing so, factors of emotion and value are not included in decision-
making but are underlying rationality perceptions with a lower degree of rationality.
The fascination with goal-rational action is also expressed in Weber’s different
perceptions of authority:

• Traditional authority. Based on historically created legitimacy where authority

is hereditary and based on dependant subordinates.
 • Legal, rule-oriented authority. The bureaucratic type of authority, based on
normative rules for career, hierarchy etc.
• Charismatic authority. The personal authority, based on a type of ‘seduction’
and hence, the
devotion of supporters.

Administrative Theory

Around the same time as Taylor, Henri Fayol developed another approach
within the rational perspective, which inverts the focus of Scientific Management.
Now, administrative processes rather than technical processes were rationalized.
The administrative principles in the form of the management’s hierarchical pyramid
structure were to function as the basis of the part of the organization that involved
activities, i.e. a top down approach.

Although Fayol’s thoughts appeared at the beginning of this century, they

were not widespread outside France until 1949 when his studies were translated.
Several different theoretical contributions to this administrative approach are
concerned with two overall principles, viz. coordination and specialization – which
have more specific underlying demands:

Coordination: Hierarchical pyramid

• All employees are accountable to one superior only.
• A superior can only have the number of subordinates which he
or she can manage (limited ‘span of control’)
• Routine work must be performed by subordinates so that the
• superior can attend to special tasks.

Specialization: Distribution of activities in working groups

• Formation of homogeneous groups according to:

• Purpose (Marketing or development department)
• Process (Typing, punching out beer bottle caps)
• Customer (Large, medium and small customers)
• Geography (Different service according to country or region)

Thus, coordination is based on a hierarchical pyramid structure in which the

members of the organization are linked to each other, and there must be clarity in
the administrative structure. Specialization, on the other hand, is concerned with
ways of grouping the organization’s activities most effectively in separate entities or
departments. This is referred to as the principle of departmentalization where
homogeneous or related activities are grouped in one entity. As it appears from
both coordination and specialization, they express a high degree of formalization,
which is one of the principal themes of the rational perspective.

Fayol and others were pioneers in the creation of administrative theory, and
therefore, they were later subjected to severe criticism for over-simplifying
administrative conditions.

Maslow- Hierarchy of Needs Theory

Maslow believed that human needs could be classified in a hierarchy of five

basic needs:

• Self-actualization needs: Need to realize one’s deepest creative and

productive potential.
• Esteem needs: Need for self-esteem, self-respect and appreciation from
others.
• Social needs: Need to socialize with other people, need for relationships
based on emotions, need for friendships.
• Safety needs: Need for physical and psychological stability and safety.
• Physiological needs: Primary needs; water, food and a home.

The idea of the hierarchy is to show that needs on a given level must be
satisfied before the needs on the next level become interesting. Or expressed in
another way, the ‘lowest’ unsatisfied need will be the most dominant for human
behavior.
 At a first glance, Maslow’s Hierarchy of Needs seems appealing, but it is
important to note that the model is only to a lesser degree supported by empirical
research. However, there seems to be consensus that needs are arranged
hierarchically.

Maslow’s Hierarchy of Needs has been criticized from a cross-cultural

perspective. In some cultures, safety needs and social needs will exert significantly
greater influence on motivation than self-actualization needs. There is in fact good
reason to assume that the needs hierarchy is structured differently in different
cultures. However, it is important to keep in mind that Maslow imagined his
needs theory as a humanist perspective on human motivation in general – not as a
model which could form a basis for empirical testing.

Mc Gregor Theory X and Theory Y

Douglas McGregor, an American social psychologist, proposed his famous X-Y

theory in his 1960 book 'The Human Side Of Enterprise'. Theory x and theory y are
still referred to commonly in the field of management and motivation, and whilst
more recent studies have questioned the rigidity of the model, Mcgregor's X-Y
Theory remains a valid basic principle from which to develop positive management
style and techniques. McGregor's XY Theory remains central to organizational
development, and to improving organizational culture.

McGregor's X-Y theory is a salutary and simple reminder of the natural rules
for managing people, which under the pressure of day-to-day business are all too
easily forgotten.

McGregor maintained that there are two fundamental approaches to

managing people. Many managers tend towards theory x, and generally get poor
results. Enlightened managers use theory y, which produces better performance
and results, and allows people to grow and develop.

Theory X ('authoritarian management' style)

• The average person dislikes work and will avoid it he/she can.
• Therefore most people must be forced with the threat of punishment to work
towards organisational objectives.
• The average person prefers to be directed; to avoid responsibility; is relatively
unambitious, and wants security above all else.
Theory Y ('participative management' style)

• Effort in work is as natural as work and play.

• People will apply self-control and self-direction in the pursuit of organisational
objectives, without external control or the threat of punishment.
• Commitment to objectives is a function of rewards associated with their
achievement.
• People usually accept and often seek responsibility.
• The capacity to use a high degree of imagination, ingenuity and creativity in
solving organisational problems is widely, not narrowly, distributed in the
population.
• In industry the intellectual potential of the average person is only partly
utilised
Open Systems Theory

Traditional theories regarded organizations as closed systems that were

autonomous and isolated from the outside world. In the 1960s, however, more
holistic and humanistic ideologies emerged. Recognizing that traditional theory had
failed to take into account many environmental influences that impacted the
efficiency of organizations, most theorists and researchers embraced an open-
systems view of organizations.

The term "open systems" reflected the newfound belief that all organizations
are unique—in part because of the unique environment in which they operate—and
that they should be structured to accommodate unique problems and opportunities.
For example, research during the 1960s indicated that traditional bureaucratic
organizations generally failed to succeed in environments where technologies or
markets were rapidly changing. They also failed to realize the importance of
regional cultural influences in motivating workers.

Environmental influences that affect open systems can be described as either

specific or general. The specific environment refers to the network of suppliers,
distributors, government agencies, and competitors with which a business
enterprise inter-acts. The general environment encompasses four influences that
emanate from the geographic area in which the organization operates. These are:

• Cultural values, which shape views about ethics and determine the relative
importance of various issues.
• Economic conditions, which include economic upswings, recessions, regional
unemployment, and many other regional factors that affect a company's
ability to grow and prosper. Economic influences may also partially dictate an
organization's role in the economy.
• Legal/political environment, which effectively helps to allocate power within a
society and to enforce laws. The legal and political systems in which an open
system operates can play a key role in determining the long-term stability
and security of the organization's future. These systems are responsible for
creating a fertile environment for the business community, but they are also
responsible for ensuring—via regulations pertaining to operation and taxation
—that the needs of the larger community are addressed.
• Quality of education, which is an important factor in high technology and
other industries that require an educated work force. Businesses will be
better able to fill such positions if they operate in geographic regions that
feature a strong education system.
 The open-systems theory also assumes that all large organizations are
comprised of multiple subsystems, each of which receives inputs from other
subsystems and turns them into outputs for use by other subsystems. The
subsystems are not necessarily represented by departments in an organization, but
might instead resemble patterns of activity.

An important distinction between open-systems theory and more traditional

organization theories is that the former assumes a subsystem hierarchy, meaning
that not all of the subsystems are equally essential. Furthermore, a failure in one
subsystem will not necessarily thwart the entire system. By contrast, traditional
mechanistic theories implied that a malfunction in any part of a system would have
an equally debilitating impact.

Contingency Theory

Contingency theories are a class of behavioral theory that contend that there
is no one best way of organizing / leading and that an organizational / leadership
style that is effective in some situations may not be successful in others. In other
words: The optimal organization / leadership style is contingent upon various
internal and external constraints.

These constraints may include: the size of the organization, how it adapts to
its environment, differences among resources and operations activities, managerial
assumptions about employees, strategies, technologies used, etc.

Four important ideas of Contingency Theory are:

• There is no universal or one best way to manage

• The design of an organizations and its subsystems must 'fit' with the
environment
 • Effective organizations not only have a proper 'fit' with the environment but
also between its subsystems
• The needs of an organization are better satisfied when it is properly designed
and the management style is appropriate both to the tasks undertaken and
the nature of the work group.

In contingency theory of leadership, the success of the leader is a function of

various contingencies in the form of subordinate, task, and/or group variables. The
effectiveness of a given pattern of leader behavior is contingent upon the demands
imposed by the situation. These theories stress using different styles of leadership
appropriate to the needs created by different organizational situations.

Fiedler’s contingency theory: Fiedler’s theory is the earliest and most

extensively researched. Fiedler’s approach departs from trait and behavioral models
by asserting that group performance is contingent on the leader’s psychological
orientation and on three contextual variables: group atmosphere, task structure,
and leader’s power position. This theory explains that group performance is a result
of interaction of two factors. These factors are known as leadership style and
situational favorableness. In Fiedler's model, leadership effectiveness is the result of
interaction between the style of the leader and the characteristics of the
environment in which the leader works.

Organization ecology / Population ecology Theory

Introduced in 1977 by Michael T. Hannan and John H. Freeman in

their American Journal of Sociology piece The population ecology of
organizations and later refined in 1989, organizational ecology examines the
environment in which organizations compete and a process like natural
selection occurs. This theory looks at the death of organizations (firm mortality) and
the birth of new organizations (organizational founding), as well as organizational
growth and change.
Organizational ecology contains a number of more specific 'theory fragments',
including:

 Inertia and change

  Niche width
 Resource partitioning
 Density dependence
 Age dependence

Organizational ecology has over the years become one of the central fields
in organizational studies, and is known for its empirical, quantitative character.
Ecological studies usually have a large-scale, longitudinal focus (datasets often span
several decades, sometimes even centuries).

Inertia and Change

This theory fragment holds that organizations that are reliable and
accountable are those that can survive (favored by selection). A negative by-
product, however, of the need for reliability and accountability is a high degree of
inertia and a resistance to change. A key prediction of organizational ecology is that
the process of change itself is so disruptive that it will result in an elevated rate of
mortality.
Theories about inertia and change are fundamental to the research program
of organizational ecology, which seeks a better understanding of the broader
changes in the organizational landscape. Given the limits on firm-level adaptation,
most of these broader changes thus come from the entry and selective replacement
of organizations. Hence organizational ecology has spent considerable effort on
understanding the mortality rates of organizations.

Niche theory
The theory fragment on niche width distinguishes broadly between two types
of organizations: generalists and specialists. Specialist organizations maximize their
exploitation of the environment and accept the risk of experiencing a change in that
environment. On the other hand, generalist organizations accept a lower level of
exploitation in return for greater security .
Niche theory shows that specialisation is generally favoured in stable or
certain environments. However, the main contribution of the niche theory is
probably the finding that “generalism is not always optimal in uncertain
environments” The exception is produced by environments which “place very
different demands on the organization, and the duration of environmental states is
short relative to the life of the organization” .
Thus, the niche theory explains variations in industrial structure in different
industries. The theory shows how different structures in different industries
(generalist vs specialist organizations) are shaped by relevant environments.

Resource partitioning
 The relationship between generalists and specialist organizations is further
developed in the resource-partitioning model which includes predictions about the
founding and mortality rates of both specialists and generalists as a function
of market concentration.
The theory can be illustrated by describing two environments. Environment A
stands for an unconcentrated mass market and environment B represents a
concentrated mass market. In environment B, generalists will always attempt to
address the center of the market where most resources peak. After all, in the center
of the market these generalists can thrive by exploiting economies of scale. claims
however that “in environment B, despite the very concentrated generalists market,
the resource space outside this market [i.e. in the periphery of the market] is larger
than in environment A, where the generalist market is less concentrated” .The
abundance of resource in the periphery can then become hospitable to specialist
organizations, and the market becomes effectively partitioned. Carroll concluded
that “more available resources should translate into better chances of success for
specialists when they operate in the more concentrated market”.

Density dependence
Organizational ecology also predicts that the rates of founding and the rates
of mortality are dependent on the number of organizations (density) in the market.
The two central mechanisms here are legitimation (the recognition or taken-for-
grantedness of that group of organizations) and competition. Legitimation generally
increases (at a decreasing rate) with the number of organizations, but so does
competition (at an increasing rate). The result is that legitimation processes will
prevail at low numbers of organizations, while competition at high numbers.
The founding rate will therefore first increase with the number of
organizations (due to an increase in legitimation) but will decrease at high numbers
of organizations (due to competition). The reverse holds for mortality rates. Thus,
the relationship of density to founding rates has an inverted U shape and the
relationship of density to mortality rates follows a U-shaped pattern.

Age dependence
How an organization's risk of mortality relates to the age of that organization has
also been extensively examined. Here, organizational ecologists have found a
number of patterns:

 Liability of newness. Here, the risk of failure is high initially but declines as
the organization ages.
 Liability of adolescence. The risk of mortality will be low at first as the
organization is buffered from failure due to support by external constituents and
initial endowments. But when these initial resources become depleted, the
 mortality hazard shoots up and then declines following the liability of newness
pattern.
 Liability of aging. Here, the risk of failure increases with organizational age.
This could be due to a liability of senescence (internal inefficiences arising from
the aging of the organization) or a liability of obsolescence (a growing external
mismatch with the environment).

This theory identifies three important concepts: information processing

needs, information processing capability, and the fit between the two to obtain
optimal performance. Organizations need quality information to cope with
environmental uncertainty and improve their decision making. Environmental
uncertainty stems from the complexity of the environment and dynamism, or the
frequency of changes to various environmental variables.

Typically, organizations have two strategies to cope with uncertainty and

increased information needs:

• develop buffers to reduce the effect of uncertainty

• implement structural mechanisms and information processing capability to
enhance the information flow and thereby reduce uncertainty.

A classic example of the first strategy is building inventory buffers to reduce

the effect of uncertainty in demand or supply; another example is adding extra
safety buffers in product design due to uncertainty in product working conditions.
An example of the second strategy is the redesign of business processes in
organizations and implementation of integrated IS that improve information flow
and reduce uncertainty within organizational subunits. A similar strategy is creating
better information flow between organizations to address the uncertainties in the
supply chain.

Learning organization Theory

A learning organization is the term given to a company that facilitates the

learning of its members and continuously transforms itself. Learning Organizations
develop as a result of the pressures facing modern organizations and enables them
to remain competitive in the business environment. A Learning Organization has
five main features; systems thinking, personal mastery, mental models, shared
vision and team learning.
Definition

There are varying definitions of a Learning Organization in published

literature, although the core concept between them all remains clear and has been
summarised by Pedler et al. as, “an organization that facilitates the learning of all
its members and continuously transforms itself". Pedler et al later redefined this
concept to “an organization that facilitates the learning of all its members and
consciously transforms itself and its context”, reflecting the fact that change should
not happen just for the sake of change, but should be well thought out. Some
definitions are broader and encompass all kinds of organizational change rather
than just change through learning , whereas others include specifics about how a
Learning Organization works. Senge defines Learning Organizations as
“Organizations where people continually expand their capacity to create the results
they truly desire, where new and expansive patterns of thinking are nurtured,
where collective aspiration is set free, and where people are continually learning to
learn together

Characteristics of a Learning Organization

Learning Organization exhibits five main characteristics; systems thinking,

personal mastery, mental models, a shared vision and team learning.
Systems thinking
The idea of the Learning Organization originally developed from a body of
work called systems thinking. This is a conceptual framework that allows people to
study businesses as bounded objects. Learning Organizations employ this method
of thinking when assessing their company and will have developed information
systems that measure the performance of the organization as a whole and of its
various components. Systems thinking also states that all the characteristics listed
must be apparent at once in an organization for it to be a Learning Organization. If
one or more of these characteristics is missing then the organization will fall short of
its goal. However O’Keeffee] believes that the characteristics of a Learning
Organization are factors that are gradually acquired, rather than developed
simultaneously.
Personal mastery
Personal mastery is the commitment by an individual to the process of
learning. There is a competitive advantage for an organisation whose workforce can
learn quicker than the workforce of other organisations. Individual learning is
acquired through staff training and development, however learning cannot be
forced upon an individual if he or she is not receptive to learning. Research has
shown that most learning in the workplace is incidental, rather than the product of
formal training, therefore it is important to develop a culture where personal
mastery is practiced in daily life. A Learning Organisation has been described as the
sum of individual learning, but it is important for there to be mechanisms by which
individual learning is transferred into organisational learning.
Mental models
Mental models are the terms given to ingrained assumptions held by
individuals and organisations. To have become a Learning Organisation, these
mental models must have been challenged. Individuals tend to espouse theories,
which they intend to follow, and theories-in-use, which is what they actually do.
Similarly, organisations tend to have ‘memories’ which preserve certain behaviours,
norms and values. In the creation of a learning environment it is important to
replace confrontational attitudes with an open culture that promotes inquiry and
trust. To achieve this, the Learning Organisation will have mechanisms for locating
and assessing organisational theories of action. If there are unwanted values held
by the organisation, these need to be discarded in a process called ‘unlearning’.
Wang and Ahmed refer to this as ‘triple loop learning.’
Shared vision
The development of a shared vision is important in incentivising the
workforce to learn as it creates a common identity that can provide focus and
energy for learning . The most successful visions build on the individual visions of
the employees at all levels of the organisation and the creation of a shared vision is
likely to be hindered by traditional structures where a company vision is imposed
from above. As a result, Learning Organisations tend to have flat, decentralised
organisational structures. The topic of shared vision is often to succeed against a
competitor, however Senge states that these are transitory goals and suggests that
there should also be long term goals that are intrinsic within the company.
Team learning
Team learning is the accumulation of individual learning. The benefit of
sharing individual learning is that employees grow more quickly and the problem
solving capacity of the organisation is improved through better access to knowledge
and expertise. Learning Organisations have structures that facilitate team learning
with features such as boundary crossing and openness. Team learning requires
individuals to engage in dialogue and discussion, therefore it is important that team
members develop open communication, shared meaning and understanding.
Learning Organisations also have excellent knowledge management structures,
which allow creation, acquisition, dissemination, and implementation of this
knowledge throughout the organisation.

Benefits
 There are many benefits to improving learning capacity and knowledge sharing
within an organization. The main benefits are;

 Maintaining levels of innovation and remaining competitive

 Being better placed to respond to external pressures
 Having the knowledge to better link resources to customer needs
 Improving quality of outputs at all levels
 Improving corporate image by becoming more people orientated
 Increasing the pace of change within the organization